Pharmaceutical companies have a timer against which they must innovate. Once drugs lose patent protection stiff competition emerges from generic pharmaceutical companies. The key metric to measure innovation at a particular firm is the comparison of the number of new patents to the number of expiring patents. This article from The Economist believes that the industrialized processes of pharmaceutical laboratories are not effective enough, too much money is being spent and shareholders are starting to lose their patience. As a solution, the article urges big pharma to increase their partnerships with academic and small speciality research companies. One striking quote from the article reads that pharma should “empower creative talent in the discovery phase of R&D by creating an environment in the labs that reflects the fact that discovering a drug is as much an art as it is a process.”
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2 replies on “Innovation in Pharma: More Art than Science says The Economist”
http://online.wsj.com/article/SB10001424052748704779704575553783254890778.html
This WSJ article offers a sunnier perspective on the industry. The article notes that even though worldwide research and development spending is decreasing, drugs in late stage development have a significantly higher chance of going to market than they did three years ago. The article attributes this success in part to companies forcing projects to compete among themselves for funding and also points to opportunities afforded by outsourcing. While many drug patents are expiring soon in the US, major European pharmaceutical groups have enough new products in the pipeline to compensate. WSJ believes that productivity is on the rise.
This is a hot issue. At UC Berkeley, we recently had the chance to see Dr. Ted Torphy, Chief Scientific Officer and head of External Innovation in Johnson & Johnson, the largest pharmaceutical supplier in the world. I found interesting how he highlighted that the base of this crisis is the lack of innovation not from the scientific but from the business model point of view.
The development of a new drug is a lengthy process. Before launching a new one, it is necessary to invest on it for 20 years. It usually takes from 8 to 10 years to recruit the spent make on R&D. The cost of putting a new drug on the market it from 0.8 to 1.3 billion dollars. Now, it also has to be considered that from every 100 drugs initiated only 1.5 make it to the market. That is a good indicator of the associated risk. 35% to 40% of R&D budget is spent when it is known that only 50% of the developed products will hit the market.
It is also important to contextualize this crisis within the global economic crisis. Before, the pharma industry used to rely on the public markets. Now the public markets are gone. As the risk is reduced, pharmas take more control on the product. It is hard to support a product during these early stages, and many of them die here.